NEW REPORT: Regulation – Costs, Incentives and the Need for Reform

By SBE Council at 19 October, 2016, 10:48 am

For Immediate Release                                                           

SBE Council Releases Report on the Roots of Government Over-Regulation, and the Impact on Small Business and the Economy

Washington, D.C. – The Center for Regulatory Solutions (CRS), a project of the Small Business & Entrepreneurship Council (SBE Council), released a report today – titled “Regulation: Costs, Incentives, and the Need for Reform” – which examines the causes of government over-regulation, its costs, and its causes.

View a summary of the report here.

With U.S. federal regulatory costs now exceeding $2 trillion dollars, elected officials and policymakers need to seriously examine how to rein in these massive costs, which have caused unending uncertainty across industry sectors for nearly a decade and disproportionately burden small businesses. Anemic GDP growth, business formation, quality job growth and investment can all be tied to the growth and vast intrusiveness of the federal regulatory state.

While the two presidential candidates have each outlined reforms and steps to curb the burden of regulation on small businesses, a robust discussion on this issue has unfortunately not taken place during the presidential debates.

See SBE Council’s small business profiles on the candidates and their positions here:

HILLARY CLINTON   DONALD TRUMP

Raymond J. Keating, chief economist for SBE Council, and author of the report, said, “When it comes to regulation, a critical question is: Why does government regulate the private sector seemingly without regard to the significant costs? Many times the government failure generated by regulations often turns out costlier than the purported market failure targeted for correction by regulation.”

The U.S. is currently caught in a period of hyper-active regulatory undertakings, according to the report. This is not the first time, however, for such an occurrence, as it happened in the 1930s, and during much of the 1960s and 1970s. “Unfortunately,” Keating pointed out, “the costs for the overall economy and small business are quite severe.”

As noted in the study: “Assorted studies make clear the significant costs imposed by the U.S. regulatory system in terms of lost GDP, costs imposed on small businesses, declining entrepreneurship, reduced job creation, and reduced or restrained investment and productivity. As noted in one report, studies over the past 25 years ‘have shown that the cost of regulatory compliance disproportionately affects small firms.’ In addition, as a recent survey made clear, small business owners see regulation as overly burdensome, and regulatory costs and uncertainties impact business decisions.” Keating also highlighted the period of the Great Depression to show how increased regulatory costs and uncertainties can inflict serious damage on the economy.

Pro-Regulation Bias: Keating goes on to explain that the incentives at work in politics and government encourage increased regulation despite their significant costs. It was reported, “For example, few incentives exist for voters to understand the extent and cost of regulation, while incentives are strong for special interests to spend heavily and vote based on the regulatory actions they seek. There is a strong bias among elected officials to regulate, as opposed to taking other types of action or no action at all. Also, significant incentives for government bureaucrats exist to expand agency goals, and push for larger budgets, increased power and control, and bigger staffs.”

Reforms Options Outlined: As for what can be done, institutional reforms are called for to balance against the pro-regulation bias. Among the reforms noted were improving analysis of regulatory impact on small businesses and establishing a meaningful procedure for engagement and feedback; congressional approval of all rules and regulations before they are imposed; greater use of “formal rulemakings”; strengthening the integrity of scientific data and increasing transparency; sunsetting all rules and regulations so that Congress is required to re-evaluate regulations after a certain period of time; establishing a regulatory budget, which if properly done, could be a tool to achieve greater transparency in terms of regulations and their costs; supermajority votes in Congress to pass bills imposing major regulations on businesses, entrepreneurs and investors; and setting up an independent congressional body to fully analyze proposed and existing rules and regulations.

Keating concluded: “On the presidential campaign trail, small business owners desperately need to hear more about the issues that impact them and the economy. Reforming our regulatory system is a central concern. Let’s hope that in the remaining days of the campaign, this issue gets the full attention it deserves.”

Contact: Raymond J. Keating

631-909-1122 or 703-242-5840

Email rkeating@sbecouncil.org

SBE Council is a nonpartisan, nonprofit advocacy, research and education organization that works to protect small business and promote entrepreneurship. To learn more, visit SBE Council’s website: www.sbecouncil.org. Follow on Twitter: @SBECouncil. The Center for Regulatory Solutions is a project of SBE Council.

# # #